Lending and Investment

Identifying and managing environmental risks is an important consideration in our lending decisions. The CIBC Environmental Credit Risk Management program, introduced in 1991, plays a critical role in this effort.

We developed policies and guidelines throughout the 1990s to ensure that environmental issues were identified and managed appropriately. As a result, environmental risk is evaluated for all small business, mid-market and large corporate lending transactions, and for merchant banking and project finance. Through this due diligence, we have been able to encourage and promote sound environmental management practices.

In-house expertise
Principles of environmental credit risk management
Environmental credit risk management in lending
Pre-approved environmental consultants
Project financing - the Equator Principles
Investment products

In-house expertise

In addition to developing and maintaining policies, procedures and guidelines to manage environmental risk at CIBC, the Environmental Risk Management (ERM) group provides a variety of day-to-day services to support the bank's lending and credit risk management activities. The ERM group's objective in this regard is to ensure that CIBC and its clients adhere to best practices in environmental risk management. ERM services include:

Due diligence reviews of client information and environmental data, assessment of compliance records, interpretation of consultant reports, and direct consultation with clients
Site visits and assessment of client facilities
Screening of environmental consultants and maintenance of the CIBC Pre-Approved Environmental Consultants list
Advisory services for retaining environmental consultants
Assistance in the structuring of credits, taking account of environmental risk management concerns

Principles of environmental credit risk management

CIBC has standards and procedures that set out requirements for environmental credit risk management in accordance with the CIBC Corporate Environmental Policy. In particular, these standards and procedures enable CIBC business and adjudication units to:

Identify environmental risks
Assess the materiality of those risks
Manage CIBC's exposure to high-environmental risk situations

Our Environmental Credit Risk Management Standards and Procedures follow 9 principles:

The scope of environmental risk assessment and management will depend upon inherent industry risks, the nature and value of the transaction, the nature of collateral security, and borrower risk rating considerations
Environmental site assessments (ESAs) or site inspections are required where real estate is either purchased or held as collateral
Satisfactory evidence of environmental regulatory compliance, environmental management capability, and identification and assessment of environmental liabilities will be sought from borrowers in higher risk industries wishing to obtain loans; the same will be required for investment transactions in which CIBC takes an equity interest
Where applicable, CIBC will require evidence that borrowers are adequately managing their operations in environmentally sensitive areas including, but not limited to: high conservation value forests; intact forests in tropical, temperate or boreal regions; critical habitat for species at risk, and regions that are situated in or contain endangered ecosystems
The environmental and social screening criteria specified in the Equator Principles will be carefully followed in the assessment of all applicable project financings involving projects with a capital cost of US $10 million or higher
Environmental due diligence obligations remain unchanged regardless of whether CIBC is the lead, administrative agent or a participant in a syndicated facility
The materiality of environmental risks should be factored into the development of risk management or mitigation strategies
Credit and investment applications are to confirm details of the level of environmental due diligence applied
The requirements of the CIBC Reputation and Legal Risk Policy and associated procedures are to be strictly adhered to with respect to environmental considerations

Environmental credit risk management in lending

The Environmental Credit Risk Management Standards and Procedures apply to all business lending and Merchant Banking globally. The Standards and Procedures establish different levels of environmental due diligence based on: the loan amount, the borrower's industry sector, and whether real property is taken as collateral security. We use checklists, questionnaires, and the work of professional environmental consultants, as needed, to help us in our assessment.

In 2006, we updated the Environmental Review template to include questions regarding the borrower's ability to manage climate change-related risks and the borrower's operations in environmentally sensitive areas. In addition to protecting the bank from undesired risks, our environmental review process and expertise often helps us to provide clients with a better understanding of their own risks and liabilities, and how to effectively manage them.

The Environmental Credit Risk Standards and Procedures are available to all CIBC employees through our corporate-wide policy intranet site. They are reviewed every 2 years by CIBC's Environmental Risk Management group, and material changes must be approved by the Credit Committee.

Pre-Approved environmental consultants

CIBC Environmental Risk Management maintains a database of environmental consulting firms located across Canada. The purpose of the database is to identify firms that meet CIBC's criteria for a demonstrated level of expertise, quality of services, scope of services available, adequacy of insurance coverage, and other standards when performing environmental site assessments and other third-party investigations. Consultants interested in being considered for CIBC's list of pre-approved environmental consultants are invited to contact CIBC Environmental Risk Management.

We support industry and regulatory accreditation initiatives for environmental consultants as a basis for achieving consistent quality standards within this industry. CIBC does not, however, formally endorse any specific environmental consulting firms.

Project financing - the Equator Principles

In December 2003, CIBC announced its adoption of the Equator Principles, a voluntary set of environmental and social screening criteria adopted by major international banks, based on the guidelines of the International Finance Corporation (IFC) and World Bank. In 2006, an update and revision of the Equator Principles was undertaken by a group of Equator Banks, including CIBC, in consultation with clients, social and environmental activists, and various other agencies. The new principles reflect the experience of the 41 financial institutions around the world that currently apply the principles, as well as the recent revisions to the International Finance Corporation's (IFC) Performance Standards, upon which the Equator Principles are in part based.

CIBC renewed our commitment to the principles in July 2006. The principles apply globally to projects with a capital cost of US$10 million or over, in all industry sectors. No new project finance, to which the Equator Principles would apply, was undertaken by CIBC in 2006. Learn more

Investment products

Retail Banking
As part of CIBC's product offerings, CIBC Wood Gundy provides socially responsible mutual funds to address our clients' needs. In 2006, approximately $60 million in retail mutual fund assets were sold by our full service brokerage.

CIBC Wood Gundy uses the Social Investment Organization (SIO) to define a "socially responsible mutual fund", based on a number of social responsibility and environmental sustainability criteria. The SIO is a national network committed to integrating social responsibility and environmental sustainability with investment.

Asset Management
In 2006, CIBC Global Asset Management Inc. (CGAM), managed approximately $910 million in assets according to socially responsible mandates or that have socially responsible criteria applied to the management of the funds. These include approximately $410 million in balanced mandates for institutional clients and $500 million in bond mandates for institutional clients. For certain portfolios, CGAM has defined socially responsible criteria as portfolios not holding securities of any company whose primary activities or a major part of their activities involve detrimental environmental activities, tobacco, alcohol, narcotics, armament or are active in countries with a disregard for human rights.

CGAM uses the services provided by Jantzi Research Inc. and Groupe d'investissement Responsable (GIR), to integrate social and environmental factors into the investment analysis process. These Environment, Social and Governance (ESG) research service providers give CGAM access to corporate data and analysis on a broad range of social and environmental issues, including aboriginal and community issues, corporate governance, diversity in the workplace, employee relations, environmental performance, ethical business practices, human right issues, product safety, and involvement in alcohol, gambling, nuclear energy, tobacco and weapons related production. GIR also provides detailed background of specific proxy proposals, including positions and arguments presented by both the proposal sponsors and company management.

In January 2007, we updated our proxy-voting guidelines to factor in ESG issues in accordance with the SRI Global Proxy Voting Guidelines of Institutional Shareholder Services (ISS) (300 KB).